Participatory Notes (P-Notes)

Recently, foreign portfolio investors (FPIs) registered at the GIFT International Financial Services Centre (IFSC) and with the Securities and Exchange Board of India (SEBI) have been permitted to issue Participatory Notes (P-Notes).

Participatory notes are financial instruments required by investors or hedge funds to invest in Indian securities without having to register with the Securities and Exchange Board of India (SEBI).
P-notes are among the group of investments considered to be Offshore Derivative Investments (ODIs).
Because of the short-term nature of investing, regulators have fewer guidelines for foreign institutional investors.
P-notes are easily traded overseas through endorsement and delivery.
They are popular because investors anonymously take positions in Indian markets, and hedge funds may anonymously carry out their operations.
Some entities route their investments through participatory notes to take advantage of tax laws that are available in certain countries.